Capitalsynthesis

Here some reports missed from the last update. I’m going to treat this update as a release point for many reports over this weekend so do please check back here over the coming days. I’ll be releasing many 2015 views as well here.

Firstly Fitzpatrick at CB (which i’ll update with his new report tomorrow or over the weekend).

CB-Wklytech-28-11-14

And here a very useful UB report on specific equity tech which reminds me a little of the Stan Wienstien’s famous technical report.

UB-EquityTech-02-12-14

And here GS’s tech report from last week.

GS-27-11-14

And here CS with a forward look macro/tech mix.

CS-Flows-02-12-14

And here a couple of great forward looks at 2015

JP-FXStrat-2015

And here MS

MS-EMstrat-2015

And here CS wealth

CS-Wealthwkly-28-11-14

Much much more to come on this page.

Thanks Rich

 

The time of the week for a major release and tech update.

This bull market is stronger that many would have ever imagined. Monetary induced or a real recovery no matter. We are paid on price and price is moving relentlessly higher. Cash as an asset class remains very undesirable and therefore all asset markets irrelevant of data or risk continue to move higher.

The Swiss team were traveling last week but here below find their latest report. They do, up front, acknowledge that they have been “too cautious” on the strength of equity markets most recent bounce and they have updated their cyclical model to adjust for this strength.

“One consequence of the continued and exhaustive overshooting is that we expect our anticipated later December top to shift into early December, which we would see as the beginning of a distributive top building process that could last into January before starting a significant correction cycle into later Q1.”

Its right they look for the probable event of a distributive top but its also worth stating that the higher we rise in this near vertical manner the higher the probability there is of an unforeseen event causing the market to sell off in a dramatic style. You cannot forecast unforeseen macro events but assets markets usually put a price on risk. At present macro trend changing risks are high whereas the discount applied to these risks is at new record lows.

From a breadth perspective the Nasdaq (and particularly Nas100) is simply on fire to the upside. The breadth is so high now that its becoming contrarian and signals the index is in a parabolic phase.

We have, of course, seen this sort of mania before for tech issues. Whether this parabolic bull market for tech ends like the last one we cannot say yet but the more vertical this goes the higher the chance of the same sort of wash out ending. Most other indexes have scored negative divergence on the latest higher highs in price as the swiss team comment.  The Sp500 is certainly less convincing than the nasdaq100 is. Although the level of strength, even here, is more convincing than i would have expected a month or two earlier. Its all indicative of an Q1 or even h2 market top, unexpected event aside, occurring.

The commodity complex is of great interest to all and they remain broadly bullish the sector in spite of the recent Aud breakdown.

“Generally, a break of the early November low at 2.95 would be bearish copper and would basically negate our whole commodity rebound scenario, so we would keep a close eye on copper as a key indicator for the commodity complex”!

Yes i would tend to agree that and note GS have a bullish bias of a +2 on copper via their weekly technical report. (Gold bearishly bias -2).

Fx they forecast a near term turn in the fortunes of the USD lead by a reversal in the usdjpy.

I realize many are waiting for this report so without delay here the report:

wklytech-25-11-14

And here an excellent piece of work from the same house running comparative nos on equity performances:

UB-EquityNos-24-11-14

And here a double update from Fitzpatrick whose allocations are doing nicely now having struggled earlier in the year.

CB-wklytech-14-11-14

And here his latest report:

cb-wklytech-21-11-14

And here last week’s isi report

ISI-wktech-14-11-14

And here GS with their regular tech weekly

GS-Wktech-15-11-14

And here their latest

gs-wktech-22-11-14

And here the CS tech report

CS-coretech-20-11-14

And here the latest regular MS fx tech report

MS-FXwkly-21-11-1

And here the good JP fx tech wkly report:

JP-FXwkly-15-11-14

And here Barcap

Barcap-fxtechwkly-24-11-14

I do have other useful reports i want to update with in the next few days.

All the best

Rich

I will update this I promise later today.

But here a preview in case you are also working this Sunday.
To recap multi decade themes, our problems in our fiat US$ system are about debt and sustaining the exponential ms expansion. Its correct therefore that credit markets should continue to be a lead on what is happening to our asset markets and economy.

Credit markets (or debt markets to you and me) are not sending a healthy message here and are diverging from the run up in equity prices and that is interesting and worthy and worthy of some analysis. Why are they are not confirming the higher highs? Is it simply higher rate expectations or something more?

Firstly, “junk” is having a disastrous time. Is it simply due to higher rates coming soon at the short end? Or is that default rates are about to risk due to the weak international economy and surging US$?  We can test which of these it is via the treasuries. At the short end ie 1 to 3 year treasury bills all have no confirmed the new higher high in asset markets. Rates have not made new highs. We can ask if everything is so good in the US economy then a rate rise at the short end is guaranteed surely so why are the short end treasuries not confirming this? Long end remains at very low rates. The yield curve could invert around the 5year mark if yellen increased rates by 25 to 50 basis points, which is telling! Tips is tracking lower which is also extremely interesting and bearish risk.

A good question is if rates are not rising for the short term treasuries why are they rising so quickly for junk bonds? The answer surely has to be its the economy stupid!

Here an excellent report from DB.

Unless you have a passion for FI i would skip to page 35 which gives an excellent account of where we are in the Junk bond high yield credit markets. The recent price action has diverged from risk assets and it appears not to be simply due to rising rates expectations at the short end of the yield curve. Its a good read and is one of the key bubble asset markets at present. Any step change in volatility here should be closely monitored as there is immense contagion threat to other frothy asset markets.

DB-GFIncome-wkly

And here MS taking their bullish stance on risk to HY as well on page 9 they run through their bullish argument.

MS-gm-nov14

And here Yardeni with some useful charts on global rates.

Yardenirates-nov14

A work in progress but i point to some reports here to assist.

First up the first 2015 forecast release. Here from CS

cs-2015

There ten top trades are interesting merely in that they do show the current consensus quite nicely in the market.

Even if you agree directionally in the medium term the entry on the short term may be a total reversal of their recommendations i suggest.

And the cs multi market views:

cs-core-12-11-14

And here the cs macro perspective

cs-macro-11-11-14

And here the cs wealth team:

cs-wealth-9-11-14

Here JP with some fund flow comments:

JPM-flows-11-11-14

And here a couple of technical additions that were missed on last Tuesday’s release.

Firstly the UBS wealth team getting in on the technical act with their perspectives.

UBSwealthtech-11-11-14

Here the regular GS charts tech release.

GS-tech-08-11-14

Rich

Its Tuesday evening so time to review where we are here across the international asset markets.

The recovery in stock prices has been near vertical. Momentum is finally fading and breadth on each new high is producing divergences on the near term. Sentiment via AAII as well as the put call ratios suggests extreme bullishness with AAII sentiment at her 9 year highs. Europe is diverging badly from world markets and the commodities have been badly hit by the US$ strength.The same price issues of defensive asset classes performing well alongside strength in equity cyclical risk sectors remains in place and are unresolved from a trend perspective.

Looking at some of the specific the detail we have clear divergences between asset classes that might be an early signal of an impending technical trend change. Oil and gold scored lower lows as the US$ scored her higher high and the wider commodity index has been showing signs of a base with a break down in her inverse correlation to the dollar basket. Copper, from the metals has a strong base at the 3$ mark and like the commodity index has positive divergence. Oil and gold have suffered from ultra bearish sentiment so the snap back in the dollar is to pull back a little could be sharp.

Here four charts together providing a good illustration of the CRB’s positive divergence to the dollar basket.

Here the scotia on the latest cftc report with a focus on FX.

cftc-sentiment

Here the scotia on the latest DB report with a focus on commodities.

DB-CFTC Commitment of Traders

Note the large accumulated short positions on copper. No metal is more shorted than copper at present and yet the support level has held and she shows positive divergence to her primary correlated instrument, namely the us$. Additionally near term volatility is low so the door is open to an asymmetric trade long.

We can see the obvious that accumulated US$ positions have reached their highest net long position since the credit crisis of 2008. The price move is extended but it has momentum and shows no obvious signs of a turn yet. If the CRB index is the lead there are indications that, at the least, positions need to be re-weighted and this would be meaningful for commodity currencies particularly the AUD where the cftc shows uber bearish net positions.

As regards to bullion whatever happens here as regards to a commodity bounce the window remains open to taking an asymmetric trade in the commodities. Copper has extremely low volatility on the near term. Directional options are relatively cheap at present for those up to speed on these instruments.

I’ll leave the multi asset detail to Swiss team here:

wklytech-11-11-14

And here Fitzpatrick the tech guru at Citi

cb-wklytech-11-11-14

And here ISI

isi-wklytech

And on the fx tech MS

ms-fxtech

I will provide an update to this report tomorrow.

Rich

 

 

The Swiss team are back and below please find their latest technical analysis comments on world markets.

Its the usual excellent report.

I would only want to add the strength of the breadth issue to build on the case for a confusing new December high in some US indexes and sectors, Nasdaq included! The recent high momentum highs have been off the back of solid breadth and this makes the case for new December highs more likely than i would have predicted a month or so ago. Positive divergence even on the small cap US indexes.

On the surprising strength of breadth, for a moment, via the nasdaq100.

Recall when you look at this breadth, marginally above the july breadth high that the july new high occurred as price made a 5.5% leap above her 52week high. This latest high occurred 2% above her prior high and yet this breadth of 52week new highs is higher. This is a form of price positive divergence, in effect, so we should expect more strength to flow after these over bought levels return to a std of +1 over mean, approximately. To expect more of a near term correction would be optimistic, in my view. The US has technical strength here.

This aside the world picture is still weak technically here and US and Japan aside nothing has technically changed thus far for dm markets. Europe and Asian markets (Japan India and China aside) have not rebounded in the way US markets have. At the very least US markets are very over stretched and so likely due a pause here.

Across asset markets the same themes as for much of the year hold true. The US$ continues on scoring a new higher high which is leading to much continued weakness across commodity markets.

(Note on this chart that over the last 15years some currencies have significantly out performed the dollar including the sgd and the chf).

Oil is simply collapsing as a consequence with the break of 79$. If we run the correlation of us$ to oil we see a mid 2005 to mid 2006 price of 70 to 80$ as being a mean price for oil at this level of the us$. Is the 15 year secular oil bull run official over many are now asking? If the US$ keeps rising the answer appears likely yes.

Recall Meanwhile, technology and bio tech power onward as simultaneously government bonds rise. This time the defensive sector has joined the move with the highly defensive utilities making breakout highs correlating well to sovereign bonds, in the absence of heavy weight qe. Note euro high yield bonds (ie euro bonds junk) as well as US high yield (US junk bonds) have not bounced back in the way you might suppose. We have US market breadth in the rebound move but its not being confirmed by world markets nor bond markets. The US$ continues to rise which is not usually a sign of increasing liquidity from the world’s funding currency.

My view is there is much room here to be cautious, near term. But post a corrective move I’m no longer certain in the Swiss team’s call of a uber weak q1/q2. The US can monoline growth. She has done it before and she can do it again. Instrument wise the US junk bonds and US defensives will be key, i suggest to tell us if and for how long the US can sustain this price strength. I agree that new trading highs are possible and would go so far as to say that this is likely. That into Dec/Jan major US indexes push on marginally at least, due to the breadth that has occurred on recent moves but its likely to be choppy price action and remain unconfirmed by other instruments. Unless other instruments confirm the party (like HY joining and Defensives breaking down) it becomes unlikely that US indexes will sustain this mono line US price and breadth strength. Or rather these non confirmation will lead to the mono line trend to be tested again and again before the move is believed and joined by capital flowing to other instruments in choppy and testing flow. European indexes can continue to struggle, and a negative beta likely for the mid and small caps particularly that don’t benefit from any US$ earnings.

Anyway, here without more delay the swiss team’s latest.

wklytech-04-11-14

Here GS. Note the +3 sustained conviction level on the Shanghai and Nik225

gstech

And here formerly AG now with ISI and a shift in stance.

isi

And here Fitzpatrick staying bullish

cb-tech

I’ll update this or issue a new report with CS tech, JP and many more besides in the next few days.

All the best

Rich

We have a cut down technical update this week due to the Swiss team and AG traveling.

Equities have bounced further and faster than many predicted with the sp500 having over achieved sp500 1985 yesterday) the Swiss team’s target of 1950.

Sector wise technology and biotech are leading the charge with the biotechs scoring a strong break out of their prior highs. Apple is leading the technology pack with a significant breakout of her prior high. Europe is lagging and cyclical commodity stocks badly lagging. Housing and banking are also lagging.

Breadth across many sectors has improved, notably ssp500 stocks making new 52 week highs has surpassed sept levels. Ie we have more 52 week highs at 1985 than we did at when the sp500 was over 2000 back in Sept. Many stocks have significant momentum here it seems. The Nasdaq 100 hasn’t seen such a high score of new 52 week highs since March 2014.

Note when strong levels of new 52 week highs were scored it was usually upon price achieving breakout new higher highs. Here we see the nasdaq100 scoring strong breadth without scoring new higher highs in price. Positive divergence in fact albeit at over bought momentum levels.

The smaller cap sp600 has the highest level of new 52 week highs since March. And so it goes on. Even the broader nyse has scored strong breadth even as price struggles indicating that post a correction in momentum a reattempt at prior highs is likely to occur.

Its been a blood bath for many bear camp shorts that weren’t able to adapt to the changing signals. The put call ratio testifies to, as below. Huge option hedges were placed into the market and almost all have now reversed. (Even short term volatility indexes are coming back to low levels). Investor sentiment has bounced back very strongly (a bit too strongly) and is once again close to contrarian levels. The total put call ratio, having leap to a +4 standard deviation is now back to her mean level. I don’t want to blind you with indicators here but, post a minor corrective sell off to reset momentum divergences (and likely some chop) US equities appear ready to retest their prior highs.

Without more delay here the tech guru Fitzpatrick at Citi feeling bullish

cb-wklyteh-24-10-14

Here the team at JP (ems)

jp-em-24-10-14

And here CS with their investment weekly:

cs-investwkly-25-10-14

And here MS with their wkly FX tech report:

fx-tech-27-10-14

I have more reports to update with which i will do in the next 24hrs. We have had a few technical problems with our web server. Apologies for this but every thing is now working fine again.

All the best

Rich

 

Asset markets have been moving very quickly over the last 10 days or so. I’m afraid last week I had to focus on my own practice and therefore was unable to bring you a full technical release. This week I have therefore included last week’s missing reports and expanding the usual release to include various macro reports as many in-house analyst team’s have updated their forecasts and year end macro and micro projections. I’ve also included some intra market liquidity and allocation reports here as well.

We have seen volatility spike up and a consequence of this, from a purely technical money management perspective, will be to reduce allocation sizes ie leverage and increase hedges. These cross winds should reduce the directional certainty of the previous 20 months or so and the effects of this correction are likely to be felt for some time to come.

Here nyse margin:

Here Equity capital inflows which are negative again whereas bond inflows have surged:

Timing wise, last week produced a classic wash out in sentiment, volatility and price getting to our projected -10% target across major US indexes and more than this across some international indexes. And much more than this across several cyclical sectors inc oil services. The equity rebound has been as beautiful and swift as the declines were ugly and disorderly at times. Its been a good trading environment if you work on shorter timescales. The euro and commodities are still bouncing and the dollar basket has corrected a little. Fixed income surged but is now back to its prior range. The only trend to have broken over the last few weeks are equity trends and equity 200dmas which appears likely to be meaningful medium term. We are approaching the positive xmas seasonal period but prior to this some directional confusion should be expected.

During last week’s correct, one example of anecdotal technical weakness were the number of stocks making 52 week lows (US indexes) shot up to 5 year levels of weakness even though indexes were well off their 52 week low price levels. Its indicative of a classic “topping out” process.  It seems very reasonable that once the post correction bounce is exhausted we will have a period of indecision, at the least, here, as above. Its easy to lose money in these periods taking what appears to be momentum moves only to get caught in “whipsaw” price action.

Without delay here the Swiss team with their latest:

wklytech-21-10-14

And here last week’s AG report:

ag-wklytech-11-10-14

And here this week’s AG report:

ag-wklytech-18-10-14

And here cb’s Fitzpatrick with his update from last week:

cb-wklytech-10-10-14

And here with his latest:

cb-wklytech-17-10-14

Here GS provide their latest technical weekly comments & charts:

gs-techwkly-18-10-14

Note the bullish conviction level of 3 on the Shanghai. Asian markets, Japan aside have out performed during this correction.

CS provide their core views here:

CS-coreviews-17-10-14

Leading on to more technical views here:

cs-globalcharttech-18-10-14

And here

cs-mmtech-17-10-14

And here

cs-wklyytech-15-10-14

And here the wealth team with their allocation shifts:

CSwealth-18-10-14

And here JP with their allocation shifts:

jp-allocations-18-10-14

And here JP Caz with their equity recs:

JPcaz-equity-15-10-14

And here JP with a good report on the liquidity implications of the correction:

jp-liquidity-18-10-14

Here a macro econ report from the team at JP:

JP-globalmacro-18-10-14

And here some FX perspectives.

Firstly MS with their weekly:

ms-fxwklytech-18-10-14

Next up a couple of FX reports from JP:

jp-fx-16-10-14

jp-fx-18-10-14

And here Scotia with their FX cftc reports:

scot-cftc-18-10-14

And here with their pm cftc report

scot-pmcftc-18-10-14

And back to the indicators here Yardeni:

yardenitech-20-10-14

And here some macro reports from WF.

The baby boomers are retiring and the welfare and tax receipt implications of this are considered by WF. In our fiat system money supply growth is the real issue of these demographics I suggest.

wf-macro–demo1-14

 wf-macro–demo2-14

And here WF on Singapore:

wf-singapore-10-14

And here some useful comments and insights from the Danske team on the macro fx landscape.

Danske-fxmacro-20-10-14

We discuss on the forum pages as usual.

All the best

Rich